MCX to launch mini contracts

The Multi Commodity Exchange (MCX) is planning to launch mini contracts across most commodities in order to have a pie of India's booming retail market.

"I do not know whether the absolute consumer would be able to hedge the risk on exchange even after the launch of mini contracts. But, as the retail chapter is galloping in India, MCX wants to become a part of it," said Jignesh Shah, MD and CEO, MCX, on the sidelines of a national conference on commodities and futures trading on Monday in Mumbai.

The world's leading exchanges, including London Metal Exchange (LME) and Chicago Board of Trade (CBOT), are working on introducing mini contracts with the aim to provide small traders an opportunity to hedge the risk on exchanges.

In fact, LME is ready with mini contracts with a small size of 5 tonne to be launched in November.

As elaborated by the chief executive of the world's largest metal exchange, LME, Simon Heele, this would be settled in cash over the counter. Without providing details on the commodities, MCX is planning to introduce mini contracts, said Shah, adding that it is studying the options in various commodities for such possibilities.

In the US and Japan, 65 per cent of the retail trade is conducted by non-commercial users. It is same in India too.

The retail trade would be successful through continuous innovation, which is the joint responsibility of the industry, the exchange, the regulator and the government.

The retail sector demand is growing throughout the world and India leads, he said.

"The trade for as small as 1 kg would attract more liquidity," said Shah.

Complementing the FMC for the outstanding contributions, Shah said the volume on commodity exchanges has jumped by leaps and bounds within the short span of less than three years.

In the first six-month of the current financial year, the futures volume on the NCDEX and MCX combined touched at 19 lakh crore as compared with the comparable figure of 18.4 lakh crore at the NSC.

This was possible only through right regulations in place, coupled with the joint efforts taken by the industry, commodity exchanges and the regulator, Shah said.

Meanwhile, S Sundareshan, chairman, FMC, agreed upon the cascading impact of even a minor glitch on the exchange. Commodity is a very sensitive market which gets affected with even a minor glitch and the entire efforts of the exchange, regulator and the industry may be washed off with a small room of doubt, he said.

After two years of good business environment, the current year was declared as a year of consolidation.

But, exchanges should not tolerate any misdemeanour which would affect the entire trade sentiment. "The exchanges should have zero-tolerance," said Sundareshan.